The Sherman Antitrust Act, enacted in 1890, is a foundational statute in United States antitrust law that aims to prohibit monopolistic practices and cartels to ensure fair competition within the marketplace. Named after Senator John Sherman, who was a key proponent, this act represents the U.S. government’s first major attempt to regulate business practices that reduce competition.
Historical Context
Origin and Enactment
The Sherman Antitrust Act was signed into law by President Benjamin Harrison on July 2, 1890. It emerged during an era when industrial giants, known as “trusts,” were dominating significant sectors of the American economy. Standard Oil, controlled by John D. Rockefeller, was a primary example of a monopoly the Act intended to target.
Legislative Intent
The legislation aimed to curb the power of large business entities that could stifle competition, inflate prices, and reduce innovation. It marked a pivotal shift in the role of government in economic affairs, moving towards an active regulatory stance to protect consumers and smaller businesses.
Provisions of the Act
Key Sections of the Sherman Antitrust Act
Section 1
“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce…is declared to be illegal.”
This section targets agreements that unreasonably restrain trade, including price fixing, bid-rigging, and market allocation.
Section 2
“Every person who shall monopolize, or attempt to monopolize, or combine or conspire…to monopolize any part of the trade or commerce…shall be deemed guilty of a felony.”
This section addresses actions that seek to establish or maintain a monopoly over any part of trade or commerce.
Application and Enforcement
Governmental Agencies
The U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) are the primary agencies responsible for enforcing the Act. They have the authority to investigate and challenge anti-competitive practices, seeking injunctions or penalties against firms violating the law.
Landmark Cases
- Standard Oil Co. of New Jersey v. United States (1911): This case led to the breakup of the Standard Oil Trust based on its anti-competitive practices.
- United States v. Microsoft Corp. (2001): Microsoft was found to have violated the Act by maintaining its monopoly through anti-competitive means.
Comparisons with Other Antitrust Legislation
Sherman vs. Clayton Act
While the Sherman Antitrust Act primarily focuses on the prohibition of monopolistic practices and agreements restraining trade, the Clayton Antitrust Act of 1914 addresses specific practices that the Sherman Act does not explicitly cover, such as mergers and acquisitions likely to reduce competition.
Sherman vs. Federal Trade Commission Act
The Federal Trade Commission Act of 1914 created the Federal Trade Commission (FTC) and extended antitrust regulation by addressing unfair methods of competition and deceptive practices.
FAQs
What actions are illegal under the Sherman Antitrust Act?
How can violations of the Sherman Antitrust Act be reported?
What are the penalties for violating the Sherman Antitrust Act?
Summary
The Sherman Antitrust Act remains a cornerstone of U.S. antitrust legislation, aimed at preserving competitive markets and protecting consumers from monopolistic practices. It laid the groundwork for subsequent antitrust laws and continues to serve as a critical tool for regulating corporate conduct to promote economic fairness.
